STYLE DRIFT FOR ACTIVELY MANAGED VALUE FUNDS

AUTHOR(S)

Riepe, Mark W.

PUB. DATE

May 1999

SOURCE

Journal of Financial Planning;May99, Vol. 12 Issue 5, p38

SOURCE TYPE

Academic Journal

DOC. TYPE

Article

ABSTRACT

This article discusses the style drift for actively managed value funds. There is hardly an actively managed equity fund open for business that does not describe its investment approach as either growth, value or some combination of both. Mutual fund-oriented research in recent years has been devoted to more clearly identifying the growth- or value-orientation of equity funds. Various financial information vendors now make it easy for mutual fund investors to see an estimate of how a fund's style has drifted over time, and the mainstream financial media lets everyone know what's happening with the value/growth scorecard. With actively managed funds comes the risk of style drift; this is the risk that the fund manager will start populating the fund with stocks that are inconsistent with the style expected by the fund investor. For value funds, this could happen in a number of ways. While there is much gnashing of teeth concerning style drift, there doesn't appear to be much empirical evidence as to its frequency. To get a handle on this issue, the Schwab Center for Investment Research used Morningstar style data on diversified domestic equity value funds to get a sense of this problem's magnitude.

ACCESSION #

1877457

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